UK is an emerging centre for Innovative IT services and a strong leader in Global IT Outsourcing Industry as depicted in the article by Raconteur, Global Sourcing Blog and others. It is strikingly surprising to all IT markets in world who are experiencing a current slowdown in the IT Outsourcing Business (owing to multiple factors) that UK’s IT Outsourcing Market is growing in leaps and bounce every year. If we talk of figures, an article by Raconteur has revealed that the in the year 2017 IT Outsourcing Contracts in UK alone stood approximately 73 percent of its total Outsourcing Industry contracts. Not only this, the figure is increasing each year at double rate.
The Businesses in UK has spent £3.82 billion on IT Outsourcing contracts in 2017 which is more than double the expenditure in 2016 i.e. £1.73 billion. Now what does that gigantic figure illustrate? Outsourcing is dying in Future? Or is there some other message hidden deep down the data presented? Is IT Outsourcing in the evolving phase in UK?
We will definitely find out here. A rise in the investments in IT means clearly that the demand for skilled IT Professionals is increasing in the same proportion but still the organizations face challenges in hiring the best for their work. But before we go deep into that lets put some light on the factors which has led to UK’s Glorious IT Outsourcing market compared with others in terms of rate of growth despite the disruption taking place globally. Also, these are relevant factors which support the idea that Digital Platforms have a great role to play in IT Outsourcing in future.
Rise of Automation
One of the important and influential factors is the rise of Automation. Yes of course, will a CIO, CTO or CEO ever Outsource their IT BPO function to a location for just cost arbitrage when he can bring Automation in their customer service Outsourced Functions? Most businessmen would say “No” to Offshoring or Nearshoring in this case. This is because the beauty of Automation lies in the fact that it is free from human errors and all time available service and an honest service delivery.
Whereas in case of humanly operated less skilled Outsourced work the services offered could be sometimes below expectation and not very satisfying for the customers which can lead to a loss of money and - most importantly - the trust factor. Moreover, you do not have to pay high costs to compensate the employees for a job which requires very less intelligence and incur them high costs. This problem is not immediate, but it has gained grass slowly in each decade of IT Outsourcing eras.
Fig 1: Automation in project governance of SW development by pliXos SaaS Outsourcing Director
Economic Development in Offshore Nations
Each decade marks the improvement in the economic conditions of low wage countries which used to be the best destinations for Businesses to Outsource IT Functions especially for customer service IT Functions. Low wages countries such as India, China, etc have seen tremendous increase in their GDP due to IT Outsourcing. As a result, the basic wage rate for employees in these countries has risen posing a greater expenditure for Customers.
This rise in the wage rate or salaries of employees in offshore countries such as India, China, Philippines etc has led to the emergence of new technologies where humans will be required to do high skilled jobs in IT whereas the low skilled and repetitive jobs can be handled machines or Robots. This effect can be seen in the next coming 5 to 10 years.
Online Platforms (B2B, B2C)
Online labour platforms like Upwork, Freelancer, Peopleperhour, pliXos B2B Marketplace and many more are gaining strong visibility and challenging the traditional IT Outsourcing models. This is the greatest threat to Outsourcing Industry as Companies can hire skilled talented professionals through this platform and pay for the required work. This saves their extra time and costs that would have been incurred had the customers decide to search for candidates themselves through channels unknown and very less trusted.
Now can anyone answer or guarantee that IT Outsourcing can ever die?
Well we don’t think so it will happen in the coming 10 years. But yes, it will definitely reinvent itself and emerge in a more acceptable form as it is we all known to all since decades that no economy can be self-sufficient 100 percent without outsourcing. Globalization will die if Outsourcing dies. Globalization and Outsourcing are two sides of the same coin and they go hand in hand. Surely Automation will be prevalent in coming years and companies would build on new technologies and will also take help through Outsourcing but Strategically. A good example is the recent opening of a Makers Lab in Munich, Germany by tech giant Tech Mahindra.
We at pliXos agree with Accenture that the future of Outsourcing can be a “Corporate Marketplace” which can support the demand for skilled IT Pros and Contract Management solutions for proper governance of the full project right from the planning to implementation to production stage. Thus we see our free B2B Marketplace and our suite of SaaS tools a valuable step into this direction.
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